Managing contracts in China
If you’re doing business in China, you will at some point need a contract. A well-drafted contract that sets out the details of your agreement can reduce
the risk around a business transaction.
Unfortunately, Australians often use poorly drafted contracts that are not well suited to protecting their interests in China. Below we list key tips for your China-related contracts.
Reviewing the Chinese company’s business licence is necessary. This business licence lists the company’s key information including business registration number, official company name, registered address, business scope, and the company’s legal representative.
A Chinese company is only permitted to conduct business within its registered business scope. It’s important to check that their business scope covers the activities within your business agreement, and whether they hold relevant sector-specific permits or licences.
Much of the information relevant for due diligence is only available in Chinese and can be difficult to access outside of China. A professional service provider can help you perform due diligence on Chinese companies.
With few exceptions, China does not enforce foreign court judgements. If a contract provides dispute resolution exclusively in an Australian court, that Australian court judgement cannot be enforced in mainland China.
If you want your contract to be enforceable in China, it will generally need to either provide for dispute resolution before a Chinese court, or by arbitration (Chinese courts do enforce foreign arbitration awards).
A lawyer can advise you on suitable dispute resolution provisions for your China-related contracts.
The contract should identify the Chinese party by using their official company name (in Chinese), registered address, and their 18-digit business registration number. This information, and the company’s legal representative, are listed on the company’s business licence.